Golf courses

Trump lost $40 million on golf courses by failing to hedge currencies

  • Trump’s failure to cover loans to his Scottish golf courses has cost him tens of millions of dollars, experts say.
  • Accounts registered in the UK indicate that Trump issued US loans in sterling.
  • The pound has fallen significantly in value, adding tens of millions to its already huge losses.
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Donald Trump’s international stockpile has racked up huge losses and is dependent on loans from various Trump-owned vehicles in the United States just to stay afloat.

However, the scale of Trump’s losses may be even greater than meets the eye, with experts pointing out that Trump appears to have lost tens of millions of dollars more by not implementing a financial practice. very basic.

First, some background: Trump owns two golf courses in Scotland.

One is the iconic Turnberry near Glasgow, which he bought in 2014, and the other is Trump Golf Links International in Aberdeenshire.

These resorts lose millions of dollars every year, and none have turned a profit since Trump bought them.

Both stations also depend on loans from Trump and US-owned entities to stay afloat.

Turnberry’s parent company, Golf Recreation Scotland, owes Trump, through various US registered entities, a total of £113,425,000 (approximately $160,000,000), according to UK Companies House accounts filed in December.

Trump International Golf Club Scotland Limitedwho owns his Aberdeenshire run, owes Trump £44,400,049, also issued in interest-free loans, according to Companies House accounts.

The problem is that Trump appears to have created these UK sterling loans – evidenced by the fact that they are all listed as sterling loans on Companies House. The Trump Organization would neither confirm nor deny it.

Unfortunately for Trump, the pound has fallen significantly against the dollar since Trump began lending to his golf courses.

This means that when and if these loans are eventually repaid to Trump in his home dollar currency, they are going to be worth considerably less than when he issued them.

Trump has ‘suffered a significant loss’

trump golf scotland


Getty


Its Aberdeenshire course began racking up debt from the time it started operating in 2006, when £1 was worth nearly $2. Now £1 is only worth $1.42 (as of June 9).

Turnberry’s parent company has also taken out large loans from US-registered entities owned by Trump since he purchased the resort in 2014.

Stephen Clapham, investment analyst and founder of financial website Behind the Balance Sheet, who wrote previously on Trump’s business practices in Scotlandestimated in October last year that the value of those losses could be more than $40 million.

The pound was worth $1.27 when Clapham made those calculations, and has since risen to $1.42 (as of June 9), meaning some of those losses will have been mitigated – but the current figure would still represent a loss amounting to tens of millions of dollars. dollars.

Those losses, Clapham said, appear to have been the result of Trump’s failure to “hedge” the loans he created. Simply put, hedging is a common business practice that offsets the risk of price movements like a decline in the value of a currency by fixing the repayment rate of a loan when it originates.

There is no evidence in Companies House accounts that Trump’s loans were covered, although it is possible that Trump covered the loan privately in the United States. Insider asked the Trump Organization to confirm whether the loans were covered but did not receive a response.

“Hedging is what all companies do unless there’s a specific reason why you can’t – for example, you’re investing in […] somewhere where the capital markets aren’t developed enough to allow you to hedge the currency,” Clapham told Insider.

The prospect that Trump lost tens of millions of pounds by failing to implement a common business practice raises further questions about the soundness of his business judgment.

“The most likely explanation is that Trump made that loan and suffered a significant loss. That’s the simplest and probably the most likely explanation,” Clapham said.